The adaptive markets hypothesis: evidence from the foreign exchange market

Christopher Neely, Joshua M. Ulrich and Paul A. Weller

No 2006-046, Working Papers from Federal Reserve Bank of St. Louis

Abstract: We analyze the intertemporal stability of excess returns to technical trading rules in the foreign exchange market by conducting true, out-of-sample tests on previously studied rules. The excess returns of the 1970s and 1980s were genuine and not just the result of data mining. But these profit opportunities had disappeared by the early 1990s for filter and moving average rules. Returns to less-studied rules also have declined but have probably not completely disappeared. High volatility prevents precise estimation of mean returns. These regularities are consistent with the Adaptive Markets Hypothesis (Lo, 2004), but not with the Efficient Markets Hypothesis.

Keywords: Foreign exchange market; Foreign exchange (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-cba, nep-cmp, nep-fmk, nep-ifn, nep-mon and nep-rmg
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Citations: View citations in EconPapers (14)

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Journal Article: The Adaptive Markets Hypothesis: Evidence from the Foreign Exchange Market (2009)
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